Sigma Lithium — Interim / Quarterly Report 2021

Aug 31, 2021

SIGMA LITHIUM CORPORATION (FORMERLY SIGMA LITHIUM RESOURCES CORPORATION) CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS) (UNAUDITED)

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying unaudited condensed interim consolidated financial statements of Sigma Lithium Corporation (formerly Sigma Lithium Resources Corporation) (the "Company") are the responsibility of management and have been approved by the Board of Directors ("Board").

The unaudited condensed interim consolidated financial statements have been prepared by management in accordance with International Accounting Standards 34 Interim Financial Reporting of International Financial ReportingStandards as issued by the International Accounting Standards Board. When alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances. Financial statements are not exact since they include certain amounts based on estimates and judgments. Management has determined such amounts on a reasonable basis in order to ensure that the financial statements are presented fairly, in all material respects.

The Board is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through its Audit Committee.

The Audit Committee is appointed by the Board, and the majority of its members are independent directors. The Audit Committee meets at least four times a year with management, as well as the external auditors, to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities, and to review the quarterly and the annual reports, the consolidated financial statements and the external auditors' reports. The Audit Committee reports its findings to the Board for consideration when approving the consolidated financial statements for issuance to the shareholders. The Audit Committee also considers, for review by the Board and approval by the shareholders, the engagement or reappointment of the external auditors.

"Calvyn Gardner" "Guilherme Guimarães" Chairman and Chief Executive Officer Chief Financial Officer

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

(Unaudited)

		June30,2021		December31,2020
ASSETS
Currentassets
Cashandcashequivalents(note4)	$	40,576,508	$	13,543,024
Receivablesandotherassets(notes5and12)		582,534		503,420
Totalcurrentassets		41,159,042		14,046,444
Non-currentassets
Receivablesandotherassets(notes5and12)		124,104		111,098
Explorationandevaluationassets(note7)		3,203,346		18,354,148
Property, plantandequipment(note6)Totalassets	$	23,194,43467,680,926	$	686,30833,197,998
LIABILITIESANDSHAREHOLDERS'EQUITY
Currentliabilities
Accountspayable	$	351,220	$	1,953,633
Revolvingcreditfacility(note8)		1,378,353		2,683,880
Payrollandother taxes		435,753		267,666
Notepayable(note10)		280,173		1,941,349
Leaseliability(notes11and12)		9,713		9,082
Otherliabilities		-		72,127
Totalcurrentliabilities		2,455,212		6,927,737
Long-termliabilities
Deferredrevenue(note 9)		4,007,100		4,007,100
Notepayable(note10)		-		262,696
Leaseliability(notes11and12)		240,762		243,117
Totalliabilities		6,703,074		11,440,650
Shareholders'equity
Share capital (note 13)		92,646,319		53,910,946
Contributedsurplus		11,780,884		3,930,885
Accumulatedother comprehensive loss		(2,828,689)		(2,858,091)
Accumulateddeficit		(40,620,662)		(33,226,392)
Totalshareholders'equity		60,977,852		21,757,348
Totalliabilitiesandshareholders'equity	$	67,680,926	$	33,197,998

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Related parties (notes 5, 8, 11 and 12) Subsequent event (note 8)

Approved on behalf of the Board:

(Signed) "Calvyn Gardner" , Director (Signed) "Marcelo Paiva" , Director

Condensed Interim Consolidated Statements of Net Loss and Comprehensive income (loss) (Expressed in Canadian Dollars)

(Unaudited)

	ThreeMonthsEndedJune30,			Six Months EndedJune 30,
		2021		2020		2021		2020
Operatingexpenses
Generalandadministrativeexpenses(note17)	$	855,184	$	445,626	$	6,947,427	$	870,667
Accretionandinterestonnotespayable(note10)		5,460		79,919		43,282		166,460
Interestexpenseon revolving creditfacilityand
suppliers (note8)		57,732		22,335		125,661		57,110
Fair value adjustment on restructuring of
notepayable (note10)		-		124,109		-		9,977
Foreignexchangeloss(gain)		87,011		(544,846)		250,825		(845,230)
Depreciation		13,729		14,452		27,075		31,617
Net loss forthe period		(1,019,116)		(141,595)		(7,394,270)		(290,601)
Othercomprehensiveloss
Amountsthatmaybereclassifiedsubsequently
to profit and loss
Cumulativetranslationadjustment		1,056,722		(724,454)		29,402		(2,444,350)
Netlossandcomprehensiveincome(loss)fortheperiod	$	37,606$		(866,049)	$	(7,364,868)	$	(2,734,951)
Losspercommonshare
Equityholders of theCompanyBasicanddilutednetlosspercommon
share(note 14)	$	(0.01)$		(0.00)	$	(0.09)	$	(0.00)
Weightedaveragenumberofcommonshares
outstanding -basicand diluted		87,368,212		68,878,891		85,062,054		68,878,891

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

(Unaudited)

SixmonthsendedJune30,	2021	2020
Operatingactivities
Netlossfortheperiod	$(7,394,270)	$(290,601)
Adjustmentsfor:
Depreciation	27,075	31,617
Stock-basedcompensation	5,511,152	211,349
Accretionandinterestonnotespayable(note10)	43,282	166,460
Interestexpense on credit revolver andsuppliers (note 8)	125,661	57,110
Fairvalueadjustmentonrestructuringofnotepayable(note10)	-	9,977
Unrealizedforeignexchangegainonnotespayable(note10)	(91,578)	(911,914)
Unrealizedforeignexchangegain	48,417	-
Provision	-	(9,465)
Changesinnon-cashworkingcapitalitems:
Receivablesandotherassets	(87,767)	87,091
Accountspayableandotherliabilities	(1,650,143)	864
Other taxes	154,189	(85,733)
Netcashprovidedby(used in)operatingactivities	(3,313,982)	(733,245)
Investingactivities
Additiontoexplorationandevaluationassets	(5,365,659)	(568,010)
Purchaseofproperty, plantandequipment	(21,027)	-
Netcashusedininvestingactivities	(5,386,686)	(568,010)
Financingactivities
Leasepayments(notes11and12)	(18,799)	(18,968)
(Repayment)/drawdown of revolvingcreditfacility(note8)	(1,330,579)	2,238,151
Paymentofnotepayable(note10)	(1,875,576)	(868,474)
Proceeds from warrants exercised	132,000	-
Issue of common shares (note13)	39,380,157	-
Netcashprovidedbyfinancingactivities	36,287,203	1,350,709
Effectofexchangeratechangesoncashheldinforeigncurrency	(553,051)	(2,778)
Netincrease in cash	27,033,484	46,676
Cash, beginning of period	13,543,024	103,640
Cash,endof period	$40,576,508	$150,316

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Sigma Lithium Corporation (Formerly Sigma Lithium Resources Corporation) Condensed Interim Consolidated Statements of Changes in Shareholders' Equity

(Expressed in Canadian Dollars)

			(Unaudited)
--	--	--	-------------	--	--

	Numberof	Share	Contributed	Accumulatedothercomprehensive
	commonshares	capital	Surplus	loss	Deficit	Total
Balance,January1,2020	68,878,891	$36,190,313	$4,440,281	$(213,118)	$(31,678,201)	$8,739,275
Stock-based compensation (notes18and 19)	-	-	656,467	-	-	656,467
Netlossfortheperiod	-	-	-	-	(290,601)	(290,601)
Othercomprehensive lossfor the period	-	-	-	(2,444,350)	-	(2,444,350)
Balance,June30,2020	68,878,891	$36,190,313	$5,096,748	$(2,657,468)	$(31,968,802)	$6,660,791
Balance,January1,2021	77,782,757	$53,910,946	$3,930,885	$(2,858,091)	$(33,226,392)	$21,757,348
Privateplacement(note13)	9,545,455	42,000,000	-	-	-	42,000,000
Shareissue costs(note13)	-	(2,619,843)	-	-	-	(2,619,843)
Agentwarrantsissued(note15)	-	(873,121)	873,121	-	-	-
Exerciseof RSUs(note 18)	10,000	49,800	(49,800)	-	-	-
Exerciseofwarrants	30,000	178,537	(46,537)	-	-	132,000
Stock-based compensation (notes18and 19)	-	-	7,073,215	-	-	7,073,215
Netlossfortheperiod	-	-	-	-	(7,394,270)	(7,394,270)
Othercomprehensiveincome fortheperiod	-	-	-	29,402	-	29,402
Balance,June30,2021	87,368,212	$92,646,319	$11,780,884	$(2,828,689)	$(40,620,622)	$60,977,852

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

1. Nature of operations

Sigma Lithium Corporation (formerly Sigma Lithium Resources Corporation) (the "Company") is a Canada based lithium exploration and development company incorporated under the Canada Business Corporations Act. The Company changed its name from Sigma Lithium Resources Corporation to Sigma Lithium Corporation on June 29, 2021 after receiving approval from shareholders at the Annual General Meeting. Its shares are listed on the TSX Venture Exchange (the "TSXV") under the symbol SGMA and on the American Stock Exchange Over-the-Counter QB under the symbol SGMLF. The head office of the Company is at Suite 2200, 885 West Georgia Street, Vancouver, British Columbia, V6E 3E8.

These unaudited condensed interim consolidated financial statements are presented in Canadian dollars and include the Company's wholly-owned subsidiary: Sigma Lithium Holdings Inc. ("Sigma Holdings"), which is domiciled in Canada and incorporated under the Business Corporations Act (British Columbia), and its indirect wholly-owned Brazilincorporated subsidiary Sigma Mineração S.A. ("SMSA"). Sigma Holdings was incorporated for the purpose of developing SMSA's lithium properties located in the State of Minas Gerais, Brazil.

SMSA holds a 100% interest in four mineral properties: Grota do Cirilo, São Jose, Santa Clara and Genipapo, located in the municipalities of Araçuaí and Itinga, in the Vale do Jequitinhonha region in the State of Minas Gerais, Brazil (together, the "Lithium Properties").

2. Basis of preparation

These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis and are presented in Canadian Dollars except when otherwise indicated. They have been prepared on a going concern basis on the assumption that the Company will continue to operate for the next 12 (twelve) months and foreseeable future and be able to realize its assets and discharge its liabilities in the normal course of business.

As disclosed in note 13, the Company completed a non-brokered private placement in February 2021 with aggregate gross proceeds of $42 million.

The Company has approximately $40.6 million cash and cash equivalents available as at June 30, 2021. As described in note 3, the Company has decided to proceed with development activities in preparation for the construction of the commercial production plant at the Lithium Properties (the "Production Plant"). Although the Company has sufficient cash and cash equivalents to fund these development activities in the near-term, the Company has not yet committed to all expenditures related to the construction of the Production Plant. The Company will require additional debt financing when such long-term expenditures are committed in the future.

3. Significant Accounting Policies

Statement of compliance

The accounting policies and estimates applied in these condensed consolidated interim financial statements are consistent with those used in the Company's audited annual consolidated financial statements for the year ended December 31, 2020, except as described below. The Company applies International Financial Reporting Standards as issued by the International Accounting Standards Board. These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting. Accordingly, they do not contain all of the required disclosures and should be read in conjunction with the Company's December 31, 2020 audited annual consolidated financial statements.

Notes to the Condensed Interim Consolidated Financial Statements Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars, unless otherwise indicated) (Unaudited)

3. Significant Accounting Policies (continued)

Adoption of a new accounting policy

Effective June 30, 2021, the Project´s Xuxa deposit (the "Xuxa Mine") has transitioned from the exploration and evaluation stage (under IFRS 6) to the development stage and, as a result, $22,516,500 of the exploration and evaluation expenditures were transferred from exploration and evaluation assets to property, plant, and equipment (IAS 16). An impairment test was performed using a lithium price of US$ 750.00 per ton, an exchange rate of BRL 5.20/US$1.00 and a discount rate of 8%, which resulted in no impairment. The Xuxa Mine forms part of the Grota do Cirilo cash generating unit that also includes assets in the exploration and evaluation stage. Judgement is required in determining when an asset transitions from the exploration and evaluation to the development stage.

Property, plant, and equipment

Work-in-progress

Assets under construction are capitalized as work-in-progress until the asset is available for use. The cost of work-inprogress comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use. Directly attributable costs are capitalized until the asset is in a location and condition necessary for operation as intended by management. These costs include: the purchase price, installation costs, site preparation costs, survey costs, freight charges, transportation insurance costs, duties, testing and preparation charges and estimated costs of dismantling and removing the item and restoring the site on which it is located.

Costs incurred on mineral properties in the development stage are included in the carrying amount of the development project in work-in-progress. Development stage expenditures are costs incurred to obtain access to proven and probable mineral reserves or mineral resources and provide facilities extracting, treating, gathering, transporting, and storing the minerals. All expenditures incurred during the development stage until when the asset is ready for its intended use are capitalized.

Work-in-progress is not depreciated. When an asset becomes available for use, its costs are transferred from work-inprogress into the appropriate asset classification such as mineral properties, buildings, machinery, fixture, and plant. Depreciation commences once the asset is complete and available for use.

Sigma Lithium Corporation (Formerly Sigma Lithium Resources Corporation) Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars, unless otherwise indicated) (Unaudited)

4. Cash and cash equivalents

Cash and cash equivalents include cash, immediately redeemable deposits, and short-term investments with an insignificant risk of change in value. They are readily convertible to cash being comprised by different currency as follows:

	June	30,2021	December31,2020
DenominatedCurrencies	Amount indenominatedcurrency	EquivalentAmount inCanadianDollars	Amount indenominatedcurrency	EquivalentAmount inCanadianDollars
DepositsinBrazilianReais	606,834	$150,486	16,811	$4,124
DepositsinUnitedStatesDollars	28,030,990	34,769,640	10,613,332	13,529,876
DepositsinCanadianDollars	5,656,382	5,656,382	9,024	9,024
		$40,576,508		$13,543,024

5. Receivables and other assets

	June30,2021
Current
Prepaidlandlease(note12(b))	$12,186	$	12,055
Prepaidexpenses	173,847		175,840
Salestaxreceivable	390,650		313,803
Traveladvances	5,851		1,722
TotalCurrent	582,534		503,420
Non-current-Prepaidlandlease(note12(b))	124,104		111,098
	$706,638	$	614,518

(Unaudited)

6. Property, plant, and equipment

Cost	Vehicle	Furniture	Building	Machinery	Fixtures	Work-inprogress	Pilotplant	Right-of-useassets	Total
Balance,December31,2020	$5,888	$ 41,423	$ 12,220	$106,566	$204,756	$-	$215,379	$293,166	$ 879,398
Additions	-	10,967	-	10,060	-	-	-	-	21,027
Transfer(note 3 and 7)	-	-	-	-	-	22,516,500	-	-
Cumulativetranslationadjustment	64	1,232	133	1,873	2,221	-	2,131	2,546	10,200
Balance,June30,2021	$5,952	$53,622	$12,353	$118,499	$206,977	$ 22,516,500	$217,510	$295,712	$910,625
Accumulatedamortization	Vehicle	Furniture	Building	Machinery	Fixtures	Work-inprogress	Pilotplant	Right-of-useassets	Total
Balance,December31,2020	1,864	8,940	6,767	38,416	45,290	-	33,220	58,593	193,090
Depreciation	556	1,973	231	5,456	9,591	-	9,268	9,136	36,211
Cumulativetranslationadjustment	60	238	90	806	1,175	-	1,021	-	3,390
Balance,June30,2021	$2,480	$11,151	$7,088	$44,678	$56,056	$-	$43,509	$67,729	$232,691
Netbookvalue	Vehicle	Furniture	Building	Machinery	Fixtures	Work-inprogress	Pilotplant	Right-of-useassets	Total
Balance,December31,2020	$4,024	$32,483	$5,453	$68,150	$159,466	$ 22,516,500	$182,159	$234,573	$686,308
Balance,June30,2021	$3,472	$42,471	$5,265	$73,821	$150,921	$ 22,516,500	$174,001	$227,983	$23,194,434

7. Exploration and evaluation assets

The Company has deposits in exploration and evaluation stage with respect to its mineral properties and follows the practice of capitalizing all costs relating to the acquisition and exploration of mineral rights. Such costs include, among others, geological, geophysical studies, exploratory drilling and sampling, feasibility studies and technical reports.

A summary of explorations costs is set out below:

	June30,2021	December31,2020
Openingbalance	$18,354,148	$19,388,092
Personnelcosts(a)	2,188,601	933,045
Geologicalcosts	1,396,344	292,701
Drilling	2,221,364	47,578
Environmentalconsulting(b)	273,181	321,710
(c)Environmentalcompensation	170,704	204,828
Development/Engineeringservices	645,700	3,501
Other	59,179	62,081
(d)Cumulativetranslationadjustment	410,625	(2,899,388)
Transfer to property, plant and equipment(Note 3and 6)	(22,516,500)	-
Closingbalance	$3,203,346	$18,354,148

(a) The personnel costs include $1,562,063 related to RSUs during the six months ended June 30, 2021 (year ended December 31, 2020 - $470,032).

(b) Environmental consulting relates to maintenance, monitoring and licensing services.

(c) Environmental compensation relates to conditioning factors required by environmental authorities.

(d) Cumulative translation adjustment is the result of the exchange gain arising on the translation of exploration and evaluation assets held at SMSA, whose functional currency is the Brazilian Real, as a result of the appreciation of the Brazilian Real relative to the Canadian dollar during the six month period ended June 30, 2021.

8. Revolving credit facility

On November 29, 2019, in order to fund its working capital, the Company entered into a US$5,000,000 ($6,300,000) unsecured revolving credit facility (the "A10 Credit Facility") with A10 Group (a related party – note 12). The A10 Credit Facility bears interest at 11% per annum, calculated in US Dollars from the day funds are drawn. The A10 Credit Facility was subject to a commitment and disbursement fee of 0.65% and a due diligence fee of 0.65% of the committed amount, which were offset against any interest payable on funds drawn. This credit facility had a one-year term, which was to be the repayment date for all funds drawn. Each draw on the A10 Credit Facility was subject to A10 Group approval.

On November 28, 2020 and on May 29, 2021 A10 Group agreed to extend the maturity date by six and three months, without any penalties or additional charges.

On May 31, 2021, the Company repaid US$1,097,774 ($1,330,579) to A10 Group.

On August 30, 2021, the Company repaid $1,425,317 (US$1,126,601) to A10 Group, being the outstanding balance of the A10 Credit Facility.

Sigma Lithium Corporation (Formerly Sigma Lithium Resources Corporation) Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars, unless otherwise indicated) (Unaudited)

8. Revolving credit facility (continued)

During the six months ended June 30, 2021, the Company drew $nil (year ended December 31, 2020 - US$1,685,700 ($2,281,983)) under the A10 Credit Facility and the following balances were outstanding as at June 30, 2021 and December 31, 2020:

	June30,2021
(a)Principal	$	1,194,319	$	2,454,882
(b)AccruedInterestsandfees		184,034		228,998
Totalcredit facility liability	$	1,378,353	$	2,683,880

(a) The amount in contractual currency was US$962,850 (December 31, 2020 - US$1,925,700) (b) The amount in contractual currency was US$148,366 (December 31, 2020 – US$179,634)

9. Deferred revenue

On March 26, 2019, the Company entered into a binding head of agreement with Mitsui & Co. Ltd. ("Mitsui") under which Mitsui will prepay the Company US$30,000,000 for battery grade lithium concentrate supply of up to 80,000 tonnes annually (the "Mitsui Pre-Payment") over six years, extendable for another five years at the option of Mitsui.

An initial tranche payment of US$3,000,000 ($4,007,100) was received by the Company on April 4, 2019, while the disbursements of the remaining tranches are subject to certain conditions, including the execution of related definitive offtake agreements with Mitsui and securing loan funding for the remaining amount of the capital expenditures for the construction of the Production Plant.

As part of the total Mitsui Pre-Payment amount, for the Company to meet its construction timetable, an amount of up to US$7,000,000 for the deposits required to purchase long lead items for construction of the commercial production plant or other preproduction critical activities, can be made available as per the Company's request to Mitsui. Such payments are subject to Mitsui's approval and will be credited towards the overall Mitsui Pre-Payment amount.

Other than the initial tranche payment described above, the Company did not request or receive any funds in 2020 and in the six month period ended June 30, 2021.

10. Note payable

The outstanding balance of the note payable is herein presented at its carrying value of $280,173, including principal of $236,432 plus interest of $43,741 as at June 30, 2021, calculated as follows:

	June30,2021	December31,2020
Openingbalance	$2,204,045	$3,883,733
Accretion	29,035	167,477
Interest	14,247	98,831
Fairvalueadjustment	-	(29,052)
Unrealizedforeignexchangegain	(91,578)	(890,992)
Repaymentofinterest	(273,882)	(125,176)
Repayment	(1,601,694)	(900,776)
Closingbalance	$280,173	$2,204,045

Sigma Lithium Corporation (Formerly Sigma Lithium Resources Corporation) Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars, unless otherwise indicated) (Unaudited)

10. Note payable (Continued)

The following payments schedules due at June 30, 2021 and December 31, 2020 are outlined below.

Duedate	Reais(undiscounted)	Canadianequivalent toReais(undiscounted)		Carrying valueJune30,2021
March28,2022	1,000,000	247,930	$	280,173
Total			$	280,173
Carryingvalue				June30,2021
Current			$	280,173
			$	280,173
Duedate	Reais(undiscounted)	CanadianequivalenttoReais(undiscounted)		CarryingvalueDecember31,2020
January31,2021March15,2021March28,2022	3,859,3093,000,0001,000,000	$946,582735,817245,272	$	1,101,470839,879262,696
			$	2,204,045
Carryingvalue				December31,2020
CurrentLong-term			$	1,941,349262,696
			$	2,204,045

11. Lease liability

The lease liability is related to land leases of surface properties owned by Miazga Participações S.A., ("Miazga", a related party, (note 12) and Arqueana, a related party, (note 12) and housing leases owned by third parties. The lease liability was measured at the present value of the lease payments. The lease payments were discounted using a weighted average interest rate of 11.33% (December 31, 2020 – 11.33%), which was determined to be the Company's incremental borrowing rate. The continuity of the lease liability is presented in the table below:

LeaseliabilityatJanuary1,2020	$313,690
Additions	20,585
Interestexpense	27,465
Leasepayments	(35,231)
Cumulativetranslationadjustment	(74,310)
LeaseliabilityatDecember31,2020	252,199
Interestexpense	14,338
Leasepayments	(18,799)
Cumulativetranslationadjustment	2,737
LeaseliabilityatJune30, 2021	$250,475

As at June 30, 2021

LeaseobligationsLesscurrentportion	$250,4759,713
Non-currentportion	$240,762

Maturity analysis – contractual undiscounted cash flows

As at June 30, 2021

Lessthan oneyear	$9,713
Year 2	37,597
Year 3	37,597
Year 4	37,597
More than5years	406,992
Totalcontractualundiscountedcashflows	$529,496

(Unaudited)

12. Related party transactions

The Company's related parties include:

RelatedParty	Natureofrelationship
A10 Group	A10Groupis composedofA10ServiçosEspecializados emAvaliaçãodeEmpresasLtda. and A10 Investimentos Ltda., both companies are owned by two directors of theCompany.
Miazga	Miazga Participações S.A ("Miazga") is a land administration company indirectlycontrolled by two directors of the Company, one of which also controls part of A10Group.
Arqueana	Arqueana Empreendimentos eParticipações S.A. ("Arqueana")is a landadministration company in which two directors of the Company have an indirecteconomicinterest.
Keymanagement personnel	IncludesthedirectorsoftheCompany,executivemanagementteamandseniormanagement at SMSA.

(a) Transactions with related parties

Cost sharing agreement ("CSA"): The Company entered in a CSA with A10 Group where A10 Group is reimbursed for secondment staff 100% allocated to the Company, including legal, financial and business development personnel and 50% of shared secretarial administrative personnel.

Revolving credit facility: The Company entered in a revolving credit facility agreement with A10 Group which allows the Company to raise short-term financing debt increasing its liquidity (note 8).

Leasing Agreements: The Company has land lease agreements with Miazga and Arqueana (note 11). Part of these leases get offset by the prepaid land lease (note 5).

Share purchase agreement ("SPA"): The Company owes a note payable related to the SPA with Arqueana (note 10).

Commission fees: The Company entered into an agreement with A10 Group for acting as one of the Company's financial advisors to locate equity investors in non-brokered private placements. The Company paid finders' fee of upto 6% of the gross proceeds received from these investors (note 13).

The related party transactions are recorded at the exchange amount transacted as agreed between the Company and the related party. All of the related party transactions have been reviewed and approved by the independent directors of the Company.

(Unaudited)

12. Related party transactions (continued)

(b) Outstanding balances and expenses with related parties

	2021				2020
	June30,Prepayments	June 30,AccountsPayable/Debt	Six MonthsEndedJune 30,Expenses/Payments	December31,Prepayments	December 31,AccountsPayable/Debt	SixMonthsEndedJune 30,Expenses/Payments
	$	$	$	$	$	$
A10GroupCSARevolvingcreditfacilityCommissionfees	---	-1,378,353-	74,145(1,305,527)2,344,584	---	-2,683,880-	58,10616,196-
MiazgaLeaseagreementsPrepaidlandleaseoffset	-121,442	82,008-	23,7625,698	-123,153	82,514-	28,6855,198
ArqueanaLeaseagreementsSPA	--	168,467280,173	11,881(1,923,872)	--	169,6852,204,045	13,868(735,477)
ManagementandDirectorsTravelexpenses reimbursement	-	-	-	-	72,127	-

13. Share capital

a) Authorized share capital

The authorized share capital consisted of an unlimited number of common shares. The common shares do not have a par value. All issued shares are fully paid.

b) Common shares issued by the Company

	Commonshares(#)	Amount
Balance,January1,2020andJune30,2020	68,878,891	$36,190,313
	Commonshares(#)	Amount
Balance,December31,2020	77,782,757	$53,910,946
(1)Privateplacement	9,545,455	42,000,000
Costofprivateplacement(1)	-	(2,619,843)
Agentwarrantsissued	-	(873,121)
Exerciseof RSUs(note 18)	10,000	49,800
Exerciseofwarrants(note 15)	30,000	178,537
Balance,June30,2021	87,368,212	$92,646,319

(1) On February 12, 2021, the Company completed a non-brokered private placement of 9,545,455 common shares ata price of $4.40 per share for aggregate gross proceeds of $42 million. In connection with such offering, the Company paid aggregate placement agent fees of $2,619,845 and issued 562,860 Common Share purchase warrants having an exercise price of $4.40 per share and exercisable until February 12, 2022. In connection with this offering, A10 Group,a related party (note 12) who was part of the Company's financial advisors engaged in such non-brokered private placement, received $2,344,584 of such placement agent fees and 532,860 of such warrants.

14. Net loss per common share

The calculation of basic and diluted loss per share for the three and six months ended June 30, 2021 was based on the loss attributable to common shareholders of $1,019,116 and $7,394,270, respectively (three and six months ended June 30, 2020 – loss of $141,595 and $290,601, respectively) and the weighted average number of common shares outstanding of 87,368,212 and 85,062,054, respectively (three and six months ended June 30, 2020 of 68,878,891 and 68,878,891, respectively). Diluted loss per share for each of the periods presented did not include the effect of RSU's, stock options and warrants as they are anti-dilutive.

Notes to the Condensed Interim Consolidated Financial Statements Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars, unless otherwise indicated) (Unaudited)

15. Warrants

	NumberofWarrants	Grantdatefairvalue
Balance,January1,2020	248,352	$217,929
Expired	(248,352)	(217,929)
Balance,June30,2020	-	$-
Balance,December31,2020	-	$-
Issued(1)	562,860	873,121
Exercised(note 13)	(30,000)	(46,537)
Balance,June30,2021	532,860	$826,584

(1) The fair value of the 562,860 Common Share purchase warrants of $873,121 was estimated using a relative fair value method at the date of the grant. For this calculation the Company used the Black-Scholes option pricing model calculation with the following inputs: the market price on valuation date of $4.40; expected dividend yield of 0%; expected volatility of 66.61% using the historical price history of the Company; risk-free interest rate of 0.17%; and an expected average life of one year (note 13).

16. Financial risk management

The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate risk, foreign currency risk and price risk).

The fair values of cash, accounts receivable, accounts payable, note payable and accrued liabilities approximate their carrying values due to the short term to maturity of these financial instruments.

17. General and administrative expenditures

	ThreeMonthsEndedJune30,			Six Months EndedJune 30,
		2021		2020	2021		2020
Stock-basedcompensation	$	60,136	$	87,079	$5,511,152	$	211,349
Salariesandbenefits		263,295		51,386	356,238		167,323
Legal		46,240		-	114,192		20,000
Travel		10,761		6,636	21,796		44,413
Professionalfees		34,293		11,857	60,839		21,201
A10Group–CSA(note12(a))		38,638		33,820	70,461		58,106
Businessdevelopmentandinvestor
relations		194,992		92,602	289,656		156,094
Accounting		19,837		26,475	43,674		46,271
Auditing		77,226		99,953	273,795		48,620
Interest and tax		3,545		-	33,202		-
(a)Donations		46,073		-	46,073		-
Othergeneralandadministration		60,148		35,818	126,349		97,290
Total general and administrativeexpenditures	$	855,184	$	445,626	$6,947,427	$	870,667

(a) Related to COVID-19 initiatives.

18. Restricted share units

The Company's Board of Directors has adopted the Equity Incentive Plan (the "Equity Incentive Plan"). The Equity Incentive Plan received shareholder approval in accordance with the policies of the TSXV at the annual and special meeting of the Company's shareholders held on June 28, 2019. The Equity Incentive Plan is available to (i) the directors of the Company, (ii) the officers and employees of the Company and its subsidiaries and (iii) designated service providers who spend a significant amount of time and attention on the affairs and business of the Company or a subsidiary thereof (each, a "Participant"), all as selected by the Company's Board of Directors or a committee appointed by the Company's Board of Directors to administer the Equity Incentive Plan.

On June 29, 2021, following the approval by the shareholders the Company amended the Equity Incentive Plan to remove the restriction on granting awards under the Equity Incentive Plan to those eligible persons that are also quotaholders of A10 Investimentos Fundo de Investimento de Ações – Investimento no Exterior.

	NumberofRSUs
Balance,January1,2020	2,146,000
Cancelled	(840,000)
Balance,June30,2020	1,306,000
	NumberofRSUs
Balance,January1,2021	687,334
Granted(1)	1,381,333

Exercised	(10,000)
Balance,June30,2021	2,058,667

(1) On March 4, 2021, the Board approved the grant of 1,381,333 RSUs to key employees,directors and designated service providers of the Company.

19. Stock options

Movements in stock options are summarized below:

	Number ofstockoptions	Weighted averageexerciseprice
Balance,January1,2020andJune30,2020	200,000	$2.10
	Number ofstockoptions	Weighted averageexerciseprice
Balance,December31,2020andJune30,2021	50,000	$2.23

The following table reflects the stock options issued and outstanding as of June 30, 2021:

Expiry date	Exerciseprice($)	WeightedaverageremainingNumberofexercisableoptionslife (years)outstanding		Numberofoptionsvested(exercisable)	Grant date(exercisable)fairvalue
August28,2028	2.23	7.17	50,000	20,000	$100,200

These options vest in 5 tranches, being 20% on each anniversary of the grant date.